German court fires first salvo at OMT

The German Constitutional Court’s decision to ask for qualification from the European Court of Justice (ECJ) before making its own ruling on OMT adds to the risks surrounding Draghi’s ‘wonder programme’. It is curious that the German Court has already expressed its opinion that the Draghi promise is illegal, but has still given the ECJ an opportunity to either agree or disagree. This creates room for a monumental legal clash. And the German Court will still have to pronounce; everything on that front points to the negative. These legal processes risk rekindling stresses in peripheral bond markets and would be negative for the euro.

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